Well, something similar has been happening to much of the stock market.

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1 Charles Sherry Director, Institutional Education Group Blue Ocean Global Wealth 9841 Washingtonian Blvd., #200 Gaithersburg, MD Tel: June Financial Market Update July 1, 2017 Like Watching the Paint Dry Have you ever watched a movie or read a book that put you to sleep? One word boring. It s a rhetorical question, as all of us have been subject to a plot that failed to inspire. Well, something similar has been happening to much of the stock market. An end-of-june Wall Street Journal story started out this way. Stock market volatility is near an all-time low Index Q2 Return* 2017 YTD Return % DJIA NASDAQ Composite S&P 500 Index FTSE Developed ex North America Index 4 Bond Yields Yield - % a/o Jun 30 & Change* Yield - % a/o Dec 30, month T-bill year Treasury year Treasury year Treasury Commodities Jun 30 Price, Quarterly Change* Year end 2016 Oil per barrel 5 $ $53.89 Gold per ounce 6 $1, $1, Sources: U.S. Treasury, MarketWatch, St. Louis Federal Reserve, CNBC * Quarterly: March 31, 2017 June 30, 2017

2 On June 9, CNBC.com reported that one key measure of volatility fell to its lowest reading since late That low came just after former FBI Director James Comey s much-anticipated testimony before a Congressional committee. Viewed through the narrow lens of the market, investors just didn t care. But boring shouldn t necessarily be viewed negatively. The Wall Street Journal also pointed out that several major global indexes had their best first-half performance since We also see the lack of downside action in the weekly movements of the broad-based S&P 500 Index, which is a measure of 500 large U.S. companies. Figure 1 highlights the percentage weekly change in the S&P 500 Index Friday s close to Friday s close. S&P 500 Weekly Change Percent 6.0 Fig % 73-straight weeks with only one weekly decline of at least 2% Data Source: St. Louis Federal Reserve Last Date: Since February 2016, the index recorded just one weekly decline of greater than 2%. That s 72 of 73 weeks. According to LPL Research, it s the longest comparable streak since 61-straight weeks (all less than 2%) ended in early The year 1995 is also the last time a full year didn t have a weekly 2% drop. Since 1950, the S&P 500 has averaged six 2% weekly drops per year. Chillin There have been several reasons for the complacency, including an economy that isn t rocking the economic boat, an expanding global economy, a Federal Reserve that continues to signal gradual rates hikes, and global central banks that remain in a very accommodative mode (though the European Central Bank has hinted it may eventually shift gears). One other reason the lack of stress in the financial system.

3 Financial stresses became a big issue in the 2008 financial crisis, when credit market seized up and lending among banks and other institutions nearly broke down. In the aftermath of the crisis, arguments arose over how to monitor developments in the financial markets. One tool is the St. Louis Fed Financial Stress Index. It s hardly a household name, but it is designed to measure stresses that may be building in the financial system. It is a compilation of 18 weekly data series, including those that measure lending in the credit markets, volatility of stock prices, and how investors view risky debt such as junk bonds. As highlighted in Figure 2, conditions are quite easy and are near the lowest levels seen since the recession ended. S T. LO U I S F E D F I N A N C I A L S T R E S S I N D E X Fig Data Source: St. Louis Fed, NBER Shaded area marks recession Last Date: Values below zero suggest below-average financial market stress, while values above zero suggest above-average financial market stress There are a number of contributors to today s relaxed mood in the credit markets. Few leading indicators point to a recession at home, corporate profits are rising, and the Federal Reserve is boosting rates at a gradual pace. In addition, investors aren t very concerned about weak spots overseas, including some of the troubled economies in Europe and emerging markets. Some will argue that complacency precedes volatility, and a more serious downturn in stocks is eventually inevitable.

4 We have experienced four downturns in the S&P 500 that were greater than 10% since 2010 per St. Louis Fed data. However, in the context of an expanding economy, stock market corrections have historically been viewed as temporary and healthy for the market. That has been the case for such downturns since Some will say valuations may be a bit extended, especially in some high-flying tech stocks. However, successfully timing a selloff and re-entering shares near the bottom is a feat that is rarely successful. Think of it this way. Predicting stock market turns is akin to predicting a fumble in a football game. You know it s an inevitable part of the game but even a well-respected sports commentator would come up short trying to call such an occurrence. Baseball great Casey Stengel s comment, Never make predictions, especially about the future, seems quite fitting. Long-term investment plans, i.e., a financial roadmap, take unexpected detours into account. Markets never move up in a straight line, but those who try to successfully time the ups and down in stocks rarely find such moves to be profitable over the longer run. 1 The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results. 2 The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results. 3 The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results. 4 The FTSE Developed ex North America Index is an unmanaged index of large and mid-cap stocks providing coverage of developed markets, excluding the US and Canada. It cannot be invested into directly. Past performance does not guarantee future results. 5 New York Mercantile Exchange front-month contract; Prices can and do vary; past performance does not guarantee future results. 6 London Bullion Market Association; gold fixing pricing; Prices can and do vary; past performance does not guarantee future results. It is important that you do not use this publication to request or authorize the purchase or sale of any security or commodity, or to request any other transactions. Any such request, orders or instructions will not be accepted and will not be processed. All items discussed in this report are for informational purposes only, are not advice of any kind, and are not intended as a solicitation to buy, hold, or sell any securities. Nothing contained herein constitutes tax, legal, insurance, or investment advice. DISCLOSURE: Investing involves risk including the potential loss of principal. No strategy can assure success or protects against loss. Past performance is no guarantee of future results. Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Please note that rebalancing investments may cause investors to incur transaction costs and, when rebalancing a nonretirement account, taxable events will be created that may increase your tax liability. Rebalancing a portfolio cannot assure a profit or protect against a loss in any given market environment. Fixed income

5 investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. Non-U.S. securities markets involve possibly greater risk of political instability and greater currency risk in addition to having been more volatile. These risks can be accentuated in emerging markets. Commodities investments are speculative and involve special risks related to weather and international political and economic developments. Equity investments tend to be volatile and do not involve the guarantees associated with holding a bond to maturity. Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the portfolio. Tactical allocation may involve more frequent buying and selling of assets and will tend to general higher transaction cost. Investors should consider the tax consequences of moving positions more frequently. Beta measures a portfolio s volatility relative to its benchmark. A Beta greater than 1 suggests the portfolio has historically been more volatile than its benchmark. A Beta less than 1 suggests the portfolio has historically been less volatile than its benchmark. Past performance is not a guarantee of future performance. Different investments involve different degrees of risk, and there can be no assurance that the future performance of any investment, security, commodity or investment strategy that is referenced will be profitable or be suitable for your portfolio. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Before making any investments or making any type of investment decision, please consult with your financial advisor and determine how a security may fit into your investment portfolio, how a decision may affect your financial position and how it may impact your financial goals. All opinions are subject to change without notice in response to changing market and/or economic conditions. Copyright 2017 Financial Jumble, LLC Blue Ocean Global Wealth All rights reserved